America is on course to plunge over the so-called "fiscal cliff",
senior Democrat leaders warned on Thursday night, as hopes for a deal before
the New Year deadline receded sharply.

"That looks like where we're headed," said Harry Reid, the majority leader of the Democrat-controlled US Senate, launching a bitter attack on the leadership of the Republican-controlled House of Representatives which he blamed for the failure to clinch a deal.

He chastised John Boehner, the Republican Speaker of the House, for failing to call his members back to work. Winter snow storms forecast for the weekend now threaten to enmesh any attempt to reconvene the House into widely predicted travel chaos.

In a bid to give the broken-down process fresh impetus, Mr Obama cut short his traditional Hawaiian holiday and returned to the White House yesterday in move calculated to show his own willingness to negotiate a last-minute deal if Congress was able to find common ground.

But as Mr Obama touched down, there were few signs of progress in negotiations to avert a crisis that economists warn could throw the US back into recession as some $680bn in tax raises and spending cuts bite after the December 31 deadline expires.

Hopes that Barack Obama's re-election last November might clear the way for a bipartisan deal to rein in America's spiraling deficits now appear to have been too optimistic.

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Senior aides from both parties said negotiations appeared to be at a stalemate, with Republican and Democrat Senate leaders not meeting since Congress broke up for Christmas.

Mitch McConnell, the senior Republican in the senate, said there was still time to avert the fiscal cliff, but said Republicans would not offer a "blank cheque" to the Democrats.

Mr McConnell said Mr Obama had asked congressional leaders to convene on Friday at the White House for last-minute talks on a deal. The meeting would be the first time Mr Obama has sat down with Senate Majority Leader Harry Reid, Mr McConnell, House of Representatives Speaker John Boehner and House Minority Leader Nancy Pelosi, since Nov. 16 and would represent that last hope for a deal before the new year.

Talk was already shifting yesterday onto who was to blame for failing to reach a deal that in the weeks before Christmas appeared to be taking shape, but collapsed when Mr Obama and John Boehner, the Republican lead negotiator, failed to close the narrow gap that separated them.

Steve LaTourette, a moderate Republican from Ohio who is leaving Congress in January, echoed public frustration over the inability of politicians to strike a deal on reining in America's spiraling deficits, when the broad terms of a deal are well-known to both sides.

"Nobody's willing to pull the trigger. Everybody wants to play the blame game. And this blame game's about to put us over the edge," Mr LaTourette said on CNN yesterday.

"This isn't a one-party or a one-house problem," he said. "This is leaders of both parties, and all branches of the government, are not willing to make a deal they know they have to make. Everybody wants their stuff but doesn't want to give up what they don't want to give up."

With negotiations broken down, Mr Obama and Mr Reid have called on Republicans to pass an interim deal to avoid the worst consequences of 'the cliff' and avoid tax hikes for everyone earning less than $250,000 - but there seems no prospect that the Republican-controlled House would accept this.

The White House reported that Mr Obama had spoken on the phone with Mr Reid and Republican leaders before departing from Hawaii.

A posting on the Facebook page of Republican Senator Scott Brown that Mr Obama had made a fresh offer to Republicans after landing in Washington were swiftly denied as “not true” by aides to Mr Reid.

But as the clocked ticked towards the New Year deadline, there appeared to be little real sense of urgency on Capitol Hill as both sides appeared increasingly resigned to failure, and the prospect of trying to retroactively repeal the tax rises in January.

Republicans members of Congress were due to speak on a conference call yesterday evening, at which some reports suggested they would be given the order to return to Washington to consider whatever the Senate put forward in the last days of 2012, weather permitting.

The failure to cut a deal has once again highlighted how dysfunctional America's politics has become, with industry leaders from a swathe of leading Blue Chip US corporations coming together to urge both parties to put restoring economic confidence before narrow political partisanship.

In a sign of the turbulent times that could lie ahead early next year, the US treasury secretary Tim Geithner warned this week in an open letter to Congress of "the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013."

Markets have so far remained largely unruffled by the failed negotiations, but analysts predicted a sharp correction in January if the difficulties thrown up by going over the cliff were not swiftly resolved.

Consumer confidence fell to its lowest monthly level since August, largely on concerns over the fiscal cliff, the Conference Board research organisation reported on Thursday.